Court Rules Condo Owners Must Pay Back Sales Taxes

DAYTONA BEACH — Owners of about 1,000 condominiums in southeast Volusia County are not exempt from a 5 percent sales tax on short-term rentals and must pay back taxes, an appeal court ruled Tuesday.

The 5th District Court of Appeal upheld a lower court ruling against owners of single condominium units in New Smyrna Beach who rent their dwellings for less than six months each year.

The amount of back taxes could be between $650,000 and $1 million, according to spokesmen for condominium owners.

The owners filed a class-action lawsuit in circuit court challenging the 5 percent sales tax levied statewide in 1977 on rentals of hotels, motels, apartments, rooming houses, trailers and other temporary living quarters.

Volusia Circuit Judge James Nelson issued a final ruling in March in favor of the state, ordering condominium owners to pay taxes back to Oct. 1, 1982, plus interest and late penalties.

The lawsuit was filed after the state Department of Revenue issued tax warrants in October 1983 giving the state the authority to sell the condominiums of 13 owners who had failed to collect and pay the tax.

New Smyrna Beach attorney John Bolt argued that because the 1977 law does not specify condominiums, those properties are exempt. But Department of Revenue attorney Jeff Kielbasa said the law applies to any dwelling rented for less than six months.

Nelson said the language of the law implies it should apply to condominiums. His ruling was consistent with an opinion by Florida Attorney General Jim Smith in 1982. The appeal court upheld his ruling without comment. Spokesmen for condominium owners have said it would be a hardship to have to pay the back taxes.

The tax is separate from local-option resort taxes also levied on short- term accommodations. In Volusia County owners of transient rentals must pay a 2 percent local-option tax levied by the county.

Nelson said last March the ruling is expected to affect condominium owners throughout Florida. Department of Revenue officials said they would aggressively pursue collecting the tax.

A large number of the New Smyrna Beach area condominium owners affected by the ruling paid the back taxes after the lower court ruling, Bolt said.